Transcripts For CSPAN Comcast-Time Warner Cable Merger Part 1 20140511

Associations whose members serve subscribers in small rural markets. Prior to joining the association, he was Vice President and general counsel for star cable so see its. Associates. He received his jd from pacific Pittsburgh University school of law. He was recipient of the law schools most distinguished graduate award. Welcome. Our next waste this witness of columbia law school. He is a law professor where his Research Examines the balance between innovation and competition set i antitrust law, it intellectual property, and other forms of regulation. From 20112012, he served as chief of the antitrust bureau in the office of new York State Attorney general. Before joining columbias faculty, he served as a law clerk. On the u. S. Court of appeals for the seventh circuit. And to Justice Scalia on the Supreme Court. He is a graduate of Harvard College in the heart London School of economics. He studied as a fulbright scholar. We welcome you, professor. Our next witness was mr. Alan, an antitrust lawyer at the law firm he advises on mergers and acquisitions, provides counsel on nonmerger matters, and prior to joining the law firm, he spent more than one decade at the United States department of justice and had justice antitrust division. He led many investigations in Industries Including radio, television, and motion pictures. He received his ba from Dartmouth College and received his jd from Rutgers Camden school law. He holds a degree from new york university. The next witness is mr. Patrick. He is founder and chairman of rural media group, inc. , the largest provider of multimedia content dedicated to rural and western lifestyle. He doesnt wear a tie. His representative asked if he should. We said we wanted him in his natural state. [laughter] if you are saying he does not have a tie on, it is the prerogative of the chairman. Thank you. Rural media group is a Parent Company of a number of Multimedia Companies including rf dtv, the first 24hour Television Network dedicated to the needs and interests of Rural America. For that, he was director of sales for superior livestock auction. Prior to joining superior livestock, he was started a company in nebraska that introduced 2000 satellites to the midwest. Before that, he worked on the Chicago Mercantile Exchange as a commodity broker. He graduated from Sam Houston State University in huntsville, texas. We welcome you. Our next witness, david shafer. Schaeffer. He is founder of Cogent Communications group prior to joining cogent, he worked in a variety of businesses. Mr. Schaeffers business successes have allowed him to build management teams that he received a bs in physics from the university of maryland where he was also a phd candidate in economics. We welcome you. Our final witness is dr. Craig level its liebowitz. He founded deep field networks. He serves as ceo and president. Hes an expert on infrastructure and cyber threats. Prior to founding deep field, he served as chief scientist for Arbor Networks based in ann arbor. His research and work is used by more than 400 Service Providers and more than 70 of the internet backbone transit traffic comes from products perfected by his research. He also served as one of the original engineers for the nsf backbone. That is where the internet as we know originated. One of the six universities was that . He received his masters of science and engineering and phd from the university of michigan and his bachelors from the university of pennsylvania. We welcome you as our final witness. At this time, mr. Cohen, we welcome your testimony. The written testimony can be entered into the record in its entirety. I ask that you try to summarize shirts summarize your testimony and five minutes. There is no electrical shock if you go past that time. [laughter] dont take that as a traffic light. Mr. Cohen . Thank you chairman baucus. We appreciate the opportunity to discuss the substantial benefits that will arise from our merger with time warner. Over the last 50 years, comcast has grown from a small cable operator in tupelo mississippi into one of the most innovative media and technology companies. We are an american success story. In a nutshell, this transaction will give us the scale to invest more innovation and infrastructure so we can impede more effectively with our Larger National and global competitors, including the bells, dish tv, and others. When we invest, so to our competitors. At t has said that this transaction puts a heightened sense of urgency on competitors to invest more in their networks and improve services. The ultimate beneficiary of this enhanced competition and greater investment is the american consumer. Specifically, comcast will bring residential customers faster internet speeds, more programming choices, more robust wifi, and our x1 operating system. Business customers will expand. It has connected 1. 2 million americans to the internet, more than any program of its kind. We will expand many benefits. Including our commitment to diversity and an open internet. More investment. Faster speeds. Better technology. More americans connected. Even with these compelling benefits, we recognize that questions arise whenever to Big Companies combine. Let me address them briefly. Americans are benefiting from robust competition. 97 of the homes in america are in census tracts where at least three competitors offer fixed or mobile Broadband Services. 99 of American Homes have access to at least three multichannel video providers. Objectively, this transaction is very straightforward from an antitrust perspective. As Ranking Member johnson said, are two companies do not compete for custom errs anywhere. It is a fact that every customer will have the same choices among broadband and video providers after this transaction as before. Nor will comcast again undo power over programmers. Last week, we announced a transaction with charter to divest almost 4 million customers, thereby reducing the number of customers to approximately 29 million below 30 share of the multichannel audio subscriber multichannel video subscribers. The fcc has concluded that a 30 ownership cap was justified to prevent a single operator from wielding undue control over programmers. But the federal courts twice rejected that cap, saying no cable operator could exercise market power 30 . Nonetheless, we will remain below that level which is essentially the same share of the market we had after the at t broadband and adelphia transactions. We keep our promises and play fair. Since the transaction, we have successfully negotiated dozens of agreements with for carriage of Nbc Universal content without withholding content from consumers and no arbitrations have been meted under the provisions. We also playfair in the exchange of internet traffic or what are sometimes called interconnections. The two markets should not be analytically conflated as some will do. We have successfully negotiated very common business arrangements with thousands of companies that connect to our network, including direct interconnection agreements with content providers such as comcast. Other isps do the same thing. The interconnection market is fiercely competitive with dozens of substantial players. Evidenced by the fact that prices have plummeted in that market by 99 over the last 15 years. Nothing in this transaction will affect the competitiveness of that market. Comcast wants to bring more investment in technology and new services to more American Homes and businesses. Doing so will incentivize our competitors to invest more, which will benefit more consumers. We have a track record as a fair competitor and a company that over delivers on its promises. Thank you for the opportunity to appear. Mr. Marcus, you are recognized. Thank you. Ranking member, chairman baucus. Members of the committee. I have appreciate the opportunity to testify. I agree that the company should of our two companies will create a Dynamic Company week for the 21st century poised for the 21st century. This transaction will give the combined companies greater scale, which will drive investment in r d, infrastructure, software, and talent. Which will bring more consumers nextgeneration technologies, or secure and reliable networks, faster broadband speeds, enhanced video and voice beads. The commendation of the companies will bring Competitive Choices to business cards customers. Not only will emerge are driving investment and innovation, it will also drive investment and innovation from competitors. Consumers will be the beneficiaries. As david explained, this transaction will achieve these benefits without reducing competition in any way. Comcast and Time Warner Cable served distinct geographic areas. To bclear, consumers will have the same choices of providers after transaction as before. The video, broadband, and voice businesses have never been more competitive. In every market, consumers have at least three and in many cases four or more choices. For many years, the satellite providers, directv and dish, have offered video nationwide. Verizon and at t now offer video and a significant portion of our footprint. Google has announced video and has expanded announced plans to expand. Smaller players offer competing services. There are an increasing number of national providers. Including netflix, with over 33 million customers. Google video websites come which attract 157 million unique visitors each month. Because of this increase in competition, programmers have more options for reaching consumers than ever before. Time warner cable and Comcast Kerry scores of independent programming networks. As for larger programmers, their ability to impose price increases every year demonstrates their extraordinary bargaining leverage. Costs will rise 10 this year. I have no doubt that large programmers will continue to negotiate from a position of strength after the transaction. Like video, broadband markets are dynamic. Cable faces competition from large players. Google fiber. Mobile wireless Broadband Services. Recent announcements by both at t and google underscore how quickly this marketplace is evolving. Just last month, at t named 100 candidate cities for broadband speeds up to one gigabyte per second. Google announced it has targeted cities for its service. Mobile is becoming an alternative to broadband. The market for voice is also flush with competition. With landline, mobile, and a number of over the top services such as skype. As new entrants into the voice business, we have contributed to the competitiveness of this market and will continue to do so as a combined company. This transaction will increase to new and enhanced competition. Services have been dominated by incumbents such as at t which leverage their scale and scope. Time warner cable has gained a foothold, especially with mall and mediumsized businesses. Our ability to compete effectively in the business of serving larger regional businesses has been constrained. This transaction will boost competition for commercial services by giving the company greater scale, a broader footprint, and efficiencies necessary to meet the needs of business customers. Especially superregional enterprises. In summary, the dynamic and ever evolving marketplace presents challenges and opportunities. Enabling the new comcast to compete with greater scale will yield better competition and benefits for consumers and businesses. Thank you for the opportunity to testify. Thank you, mr. Marcus. Let me say this. The heat was on in here when i arrived. I have asked them to turn on the air conditioner, which i understand is now kicked on. But if any of the witnesses, particularly if you have completed your testimony, or prior to giving your testimony, if you want to take off your coat, you may save yourself a lot of shine. [laughter] i would invite and encourage anyone who wants to do that to do that. Yellow great you all look great, but as this wears on thank you, mr. Chairman. This is a hotter hotseat then normal. That was not intended. I think mr. Issa sometimes turns it up, but we do not do that on this committee. It is not stress. It is hot in here. Thank you, sir. The proposed combination of comcast and Time Warner Cable with later divestitures and swaps is a big deal. The singular point that i want you to know is this is a complicated deal that will negatively impact your constituents. Unless the fcc it should not be approved. To begin with, it is important to realize that comcast is more than just the largest paytv provider. It is a large programmer through its ownership of nbc, 10 nbc owned and operated stations, 13 Regional Sports networks, and many Popular National networks. Time warner cable is also a large cable operator and a large programmer through its ownership and control of 16 Regional Sports networks, including those in new york and los angeles. I wish i could simplify this deal into a single component to read the fact is there are three separate elements to consider. First, the combination of the two companies programming. Second, the combination of comcast ramming with the new comcast programming with the new Cable Systems. Third, the combination of the Cable Systems. The first two are similar to the concerns about the Comcast Universal transaction that doj addressed through conditions. The third raises new and significant concerns not present in the comcast previous deal. Regarding the first component, by merging its programming with the Regional Sports networks and selling them in a bundle, comcast will gain greater Bargaining Power against all paytv providers in all regions where Time Warner Cables Regional Sports networks are carried. It will be syria severe in new york and los angeles where there is a television station and sports network. All consumers will be affected by this harm, and clipping many members. Including many aca members. There will be a disincentive it will do this by either withholding comcast programming during negotiation impasses, or by demanding higher prices for this programming. The competitive harm will not be limited to comcast paytv rivals. Many of these providers obtain their programming through the nctc, there will be an incentive to charge higher prices for programming. This will harm the 900 paytv providers that pay comcast through the buying group. Regarding the third component, they deny that it does not compete locally against them. However, this ignores the over video programmers. The merged entity will have about 30 of all paytv subscribers nationally. This level of market share has traditionally raise concerns with antitrust authorities. It will have greater market share because of the deal. As a result, it will become a musthave distribution outlet for national and regional programmers. In the short run, it will demand even larger volume discounts than rivals. Thereby weakening the rivals competitive positions. They may leverage their dominance to increase orchid chair in the video programming industry, ultimately reducing this industrys competitiveness. The final result will be higher prices and fewer choices for consumers. The arbitration conditions are designed to mitigate the first two conditions. Requiring them to abide by these conditions is insufficient because they are flawed. In particular, arbitration remains too expensive for smaller providers. Moreover, the conditions and completely describe how bargaining agents for smaller providers could avail themselves of the conditions. Lastly, the department of justice and fcc will need to fashion new remedies for the harm arising from combining distribution assets with distribution assets of Time Warner Cable and charter, which did not arise. The doj and sec have some Big Decisions ahead. We look forward to working closely with congress and the agencies as conditions are fashioned. Thank you very much. Thank you, mr. Polka. You are recognized. Mr. Chairman, Ranking Members. Thank you for the opportunity to testify about the antitrust invocations of the merger. As members have noted, a number of antitrust concerns have been raised. These concerns are generally based on mistaken analogies that dont generally apply. Critics have charged this merger is just like at t tmobile and can there be therefore be expected to raise prices. This is nothing like that. Suppose i want to buy a Wireless Service where i live in new york city. I can choose from at t, tmobile, or other providers. Take one of these away any remaining firms may be able to raise prices, which has the effect of squeezing consumers of the market. Compare that to video service. In west village, i could choose among time warner and other options. But comcast is not a choice, unless i am willing to move to philadelphia. Time warner does not compete anywhere. Nothing is lost by the competition. Critics offer a second technology. Clean that they are like a predatory grain barn fighting against farmers lets say the only two grain buyers in town and the two buyers merge, they have an opportunity to reduce purchases in order to depress the price. This merger is nothing like that. Programmers for Companies Like espn are nothing like farmers. When espn sells programming, nothing is used up. Espn is free to sell the same programming to other video providers and does so, to direct tv on and on. When there is no rivalry, this whole buyer strategy, this idea of cutting back on purchases to force a price job collapses. There is another argument which is that it might be able to strike a better argan thanks to its increased size. That is far from clear. Espn loses its revenue if it breaks down, but that is true for comcast. The stakes are higher. As more customers complain or cancel their service. Nor is comcast such a musthave that a gains special power that way. It costs analogy is packages like microsoft. The idea here is that netflix and other online video providers will be undermined. This deserves careful attention because i think we can all agree that preserving innovation and competition is very important. This third analogy seems wrong to me as well. For one thing, the cost of strategies is quite high. There are existing protections under the earlier nbc merger conditions for online video that would be extended to time warner, which could be thought of as a benefit to the deal. What i do think we see here is not so much foreclosure, but an ongoing fight among powerful firms, and ongoing fight to figure out who should pay for the infrastructure that makes possible the dramatic online video and how those payments should be achieved. Thank you for the opportunity to address these issues. I look forward to your questions. Thank you, professor. At this time, we invite you to testify. Thank you, chairman and vicechairman and Ranking Member and committee members. I am very happy to be here. Ive practiced antitrust law for about 25 years and about half of that time, i was with the antitrust division. Comcast and Time Warner Cable say they do not compete for subscribers and you have heard that this morning, but the fact is, comcast and Time Warner Cable to compete. That is what brian roberts, the comcast ceo, told the Senate Judiciary committee in comcasts megamerger with Nbc Universal. Mr. Roberts was right. They compete in a number of ways. They can be to carry local and Regional Sports teams and they compete for advertising dollars. Mr. Chairman, to help illustrate how sports programming would be abused post merger, i would ask unanimous consent to submit for the record and article i former Bush Administration official brad lightman. It explains the impact of the merger and is highly relevant. Without objection, all the witnesses and introduced any extraneous materials or records. Thank you. As for cable advertisers, they will have less choices if this merger goes through, including smaller local advertisers in your districts who may get shut out entirely. Comcast says people have a multitude of choices for how they get broadband. You have heard that here today. At an Investment Conference in 2011, mr. Roberts said that comcast had only one broadband competitor. He was talking about fios, which is only in 15 of comcast territories. This merger is very likely illegal, the parties know it and that is why they are here talking about how they plan to fix it. I am here to tell you what they wont. Why it is illegal and why the fix does not cut it. This time it is different. Lets talk about video first, since i think that is the easiest. They want to put together comcast content with Time Warner Cables wires. The antitrust theory is that after the merger, the company would have both the ability and the incentive to withhold nbc and sports programming from rivals such as satellite companies, other Cable Systems. That would drive up their competitors costs and make them less competitive. That is called input foreclosure in antitrust jargon. Is it a radical theory . No. It is right out of the comcastnbcu complained. But this time it is worse. Lets talk about the even more serious issue of broadband. Comcast and Time Warner Cables chairs of the broadband market shares of the broadband market are much higher. We have not heard the witnesses talk about what those shares are, but by some estimates, they are 50 or even more. What is the problem . Simple. Online video distributors like netflix come according to the antitrust division, are likely to be the best hope for additional video programming competition in comcast and Time Warner Cable territory. If comcast can get hold of about 50 of broadband subscribers through this merger, it puts itself into a position to influence how this new form of competition will play out. The antitrust theory is called customer foreclosure. Keep innovative competitors from been able to connect with their audience or charge them so their costs go up. Again, this is not a radical theory. It was mentioned that the concern in the 2011 comcastnbc u complaint. It is similar in the d c circuit in the microsoft case. Same analysis has been applied in other cases where the internet is threatening an old business model. The key point is that the legitimate role of antitrust is to keep the pathways for innovation open. There is also a buyer power theory which is discussed in my written terror testimony. If the merger is anticompetitive, the best remedy is simply to say no. The behavioral remedies do not work well. They do not present prices from going up. Partial divestitures also often fail. In this case, were comcast would pick up new york in l. A. In l. A. And other markets, it is likely to keep the most profitable subscribers and the most Profit Margins and divest the others. That will not restore lost competition and im happy to answer any questions. Thank you. At this time, you are recognized. Good morning. I, along with my two daughters, represent the founders and majority shareholders rural media group. Thank you for the opportunity to testify today about the importance of independent programming any impact consolidation the cable industry from a rural perspective. Rfd tv was launched as a Public Interest channel. Thanks to congress, and the fcc establishing the 1992 Cable Communications act, the 146 independent program producers, along with the millions of viewers have congress, the fcc, and charlie to thank for having the foresight to create and give independent channels the chance to exist and prosper. In 2007, we evolved into a forprofit entity and the media group was formed. Recognized as one of americas leading independent networks, it is ranked the most reasonably priced any independent cable news survey. Nielsen rated and distributed it is the number one channel for time spent viewing and for adults 50 plus as a percentage of our overall audience composition. In 2008, we signed an eightyear agreement with comcast following success in nashville. In october of 2010, comcast launched us on all systems in colorado and mexico and utah. We work closely with comcast and invested heavily in this launch by purchasing billboards, radio ads, organizing and training comcast telemarketers. The launch was a success. Independents try harder and have to deliver. In january of 2011, the comcastnbc u merger was approved. On august 13 of this past year, despite strong ratings, low costs, comcast dropped us on all its Cable Systems in colorado and new mexico. In one day, we lost 470,000 homes. Today, we have worked diligently to understand comcasts decision and to find a solution. The city of pueblo, colorado, and the colorado governors office, localize significant efforts for comcast to reverse its decision and return the popular programming to these two states with such strong ties to the western lifestyle. Meetings have been held with the Regional Denver Office and with comcast for birmingham executives in philadelphia to no avail. Why were we dropped . It is the question that everybody has. It is the question that everybody has. It seems to be simple. We are just a true independent. We enjoy excellent relations with all the other Cable Operators. This past year, charter launched us on their ft. Worth system and in october, time warner added us to franchises in the state of kentucky. Our concerns with comcast taking over this major western city should be obvious. In addition to 30 million homes may being denied the choice to access this proven channel and a wall built between rural and urban america. In the past, the United States government has taken critical steps to ensure that Rural America the information superhighway must put on every country road. Just as it was when the 1893 indications act led to the establishment of rfd. Thank you for allowing me not to wear a tie and i look forward to answering all of your questions. Thank you very much. Youre recognized for your opening statements. [inaudible] thank you, chairman. Ranking member johnson and the entire committee for the opportunity to voice our concerns. This particular transaction is not about video, but rather about the future. It is about the internet. 15 years ago, i had the good fortune and the good luck to found a company on a simple principle that the internet was going to be the only network that mattered, bandwidth was a commodity and technology would allow us to drive down prices forever. Those bets turned out to be correct. We went through a tough Market Segment and we have been a good citizen helping lead that technology fight in driving down the cost of bandwidth. Comcast, however, has not been quite as good of the net citizen and is looking to be a worse net citizen Going Forward if they are allowed to comply combine their network with time warner. The internet is based on the idea of Free Exchange of traffic. One of the mechanisms is comcast signs a decree with Nbc Universal and said it is not going to interfere with traffic inside of its network, it has been very clever. It interferes with traffic before it enters its network. The internet today has allowed 2. 7 billion people wirelessly and another billion people to connect. The internet is 44,000 networks. Those networks interconnect one of two ways. They buy connectivity from companies such as ours or they connect through those connections. Comcast does not operate in global network. It should be it has used its market scale and scope to extract free connectivity. It did not carry its fair load. Because it represented so many customers, operators and others agreed to peer with them. That was not good enough for comcast. They started to demand payments for connectivity. A larger comcast will demand even greater payments. Let me use an example of netflix. Netflix is our largest customer. We are their primary carrier of internet traffic. Netflix buys that connectivity because we deliver the highest quality at the lowest price. We have dozens of competitors. We offer the lowest price and the highest quality. Netflix wanted to do business with us. They continue to be our largest customer, but there was a problem. We cannot deliver all of the traffic that netflix was delivering to comcast customers. When we deliver the traffic, the ports for connections between our network and comcast became full. We went back to comcast and said, can you upgrade . Comcast refused. They not only refused cogent, they refused every other major backbone. In doing so, forced netflix into a corner. They forced netflix to have to go and directly enter into a contract with comcast, paying a higher price for a less robust product. That is not a free market. That is an abuse of market power. There are two parties that do not sit in front of this committee today. Tens of millions of consumers, i think this committee cares about them. The justice department, the fcc. There is also entrepreneurs and innovators. We sell service to thousands of providers. I cannot predict where the next youtube or the next netflix will come from. I can tell you that their Business Models are highly dependent on getting inexpensive connectivity. Thank you very much. Thank you, mr. Schaeffer. Thank you, mr. Chairman. I am least to be here today to discuss some of the technical issues that may be relevant to our consideration of the proposed comcastTime Warner Cable merger. At the outset, i want you to know that comcast and Time Warner Cable are two of the Many Companies with whom my company has commercial relationships. The views expressed for my testimony are my own. Im an academic researcher and a commercial vendor. My Current Company provides Network Management and Analytics Solutions to a range of large content companies and Consumer Internet providers. My career has included roles as the chairman of the principal internet industry Engineering Association in north america as well as the project director of several National Science foundation and research projects. I received a phd in the study of internet architecture from the university of michigan in 1999. In 2010, i collaborated on the Largest Research study of internet traffic to date. Earlier this year, my company, along with academic and Industry Research partners, began work on a large scale followup study to our 2010 research. My testimony this morning is largely based on these research efforts. 10 years ago, the internet was smaller and it looked very different than it does today. Early on, almost all traffic traveled across an internet core consisting of 1012 Large National and International Internet providers, including Companies Like at t and level three. It connected content providers would Access Networks around the world such as earthlink and aol. These interconnections between providers are known as peering. The exchange of internet traffic is largely developed without regulation. Both today and in the early days of the internet, Service Providers such as at t sometimes negotiate the exchange of internet traffic with other large providers without paying for access or traffic rights. The industry calls these arrangements settlement free peering. Consumers paid Access Networks, such as aol, and those Access Networks pay larger providers, such as at t, for connections to other Access Networks. The industry called these arrangements transit peering. Over the last 10 years, technological advances have dramatically transformed a landscape of internet connection. These Market Forces include consolidation and the rapid growth in the internet content and advertising revenue. Our research has documented the accelerating impact of these Market Forces. Internet traffic was once broadly distributed across thousands of companies. By 2009, half of all internet traffic originated in less than 150 large content and content distribution companies. Today, just 30 companies, including netflix and google contribute. Thereve also been significant changes to interconnection at the core of the internet. Today, there is much more direct interconnection between Access Networks and content providers. The removal of Transit Provider is because they seek greater efficiencies of scale. Our research has found a significant degree of vertical integration and blurring of traditional distinctions between companies. Content providers, cable internet servers, are for wholesale transit and transit internet providers provide content distribution. Level 3 is both a large Transit Provider as well as the second largest continent distribution provider. Our ongoing work has found growing diversity and complexity in the internet cyber supply chain. This refers to the increasingly diverse set of thirdparty infrastructure and services supporting the delivery of internet content. Websites once came from computers directly owned and managed by the content owners located in tens of thousands of enterprise machine closets and data centers around the world. Today, the majority of internet content leverages one or more multiple thirdparty content distribution services, hosting providers, exchange points, or cloud providers. Examples of Companies Providing these Different Services are identified in my prepared statements. I hope my testimony and my Research Findings help provide the technical context. Thank you for your time and attention. I am pleased to answer any questions you may have. Thank you, doctor. At this time, we will proceed under the fiveminute rule with questions. In order that each member has sufficient time to ask questions of our large panel, we expect to have two rounds of questioning. I will say that members i will say members of the whole committee, as we start the second round, i will yield my time to you because i am told that is the only way we can accomplish. You have been here the entire hearing. You will commence the second round. I now recognize myself for five minutes. You stated to my counterpart was that we carry independent networks because we are always focused on the consumer. If you have compelling content and you can make that case that our Consumers Want to watch the content, we will carry it. I would ask you if you stand by that statement. Secondly, i would caution you, what may be a consumer in philadelphia, maybe a consumer in alabama, or in colorado, is a totally different consumer. Thank you, mr. Chairman. I do stand by that statement. I completely acknowledge the second part of what you are saying. We try to assess what our customers want in individual markets. Where as we do centralize negotiation of content deals at of our headquarters in philadelphia, or is enormous input from local systems as to what channels and programming their customers might want to see. To put flesh on the bones of this. We think we are the most independent programmer friendly distributors in the industry. We carry 160 independent programming networks. In the last three years, we have negotiated and given expanded distribution for 120 of those networks. We are a company that really does try and find the niches of programming that customers in particular markets are interested in. Has comcast lived up to the statement . 160 programmers that he mentioned, we are proud to be two of those programmers. That has not been the case in the last year since the last merger. We were taken off of colorado and new mexico and there was not a rate dispute. We were under contract. We had the support of the city and the governors office. We had a lot of customers contacting us directly saying they could not get a hold of comcast. We invited folks to write and we would personally deliver those letters to the denver office. We have seven of these binders. Over 4000 customers were asking comcast not to remove us, yet we were still removed in august of 2013. Maybe it is not just the numbers. With mergers in the radio business, birmingham, which is an sec football town, is getting a lot of hockey news. We get a lot of soccer, which is growing, most people my age do not know what the rules of soccer are. They are football, baseball, and basketball. It is a challenge, but if you become bigger, it is a challenge need to be aware of. I am sympathetic to this argument. I was involved at the time of this decision. In a perfect world, if money was not an issue, and if bandwidth was not an issue, those systems in denver and albuquerque are very bandwidth constraint and our local teams made a judgment that it was more important for us to add more High Definition channels of popular programming, like the smithsonian channel and the food channel, that those were more valuable to the customers in the market. It is nothing punitive. We continue to carry rfd tv to about 600,000 of our customers, including in kentucky and nashville. It is not as if our customers lets stay focused on the consumer. It is not like they do not have a choice. If it is important to them, they can switch to directv in those markets. We are not controlling consumer choice. We are an urban cluster Cable Company and this content, even in colorado, the bulk of our base is in the urban areas of colorado. I think that encapsulates the fear that the rural market gets left out. There is still a lot of people i will let him respond and my time is up. The curious thing, out of the 160 independent channels that comcast carries, the appear to have taken off one of the most popular channels in the colorado and new mexico market. Our nielsen ratings are higher than the 159. Again, it was the support of local governments and the request of colorado. If there is going to be 160 independents, isnt there room for one independent channel . It appears to be 11 million homes. 70 million people. One channel devoted to Rural America is all we are asking for. Mr. Johnson for five minutes. The minority ownership in the video and broadband marketplace is good business, it is an important societal goal and it helps to expand our economy. That is a value that many people hold dear. When comcast announced its merger with time warner, it stated that it anticipated the fcc would require it to get under the 30 limit for cable tv systems. There was an agreement that has been worked out with charter to sell the 3. 9 million channels that subscribers would be required to get under that 30 . Did comcast consider doing smaller transactions with africanamerican and Hispanic Companies . This was a significant part of our discussion and remains a significant part of the discussion. There was no way to accomplish the significant tax efficiencies and competition and Public Interest and enhancing efficiencies that we have been able to generate with this. Making them available for smaller companies, whether they are minority or not minority, to be able to bid for them. It was a topic of discussion. We have had discussions with numerous minority owned groups interested in purchasing Cable Systems and ill report to you the same that we have reported to them. He will continue to look for opportunities to create minority ownership in the cable space. What about enabling already we will continue to look for opportunities to create minority ownership in the cable space. What about enabling already existing minority owned providers to get larger . I am running through my mind and i do not think it would be appropriate to disclose the various groups we have talked to. I am not sure whether any of them are existing minority owners of Cable Systems. To the extent we would engage in this kind of a process, we would not exclude those types of groups from participating. I have some credibility speaking to this because four years ago, but we were doing that Nbc Universal transaction, i talked about our companys commitment to minority ownership in the cable channel space. I referenced tv 1, which we helped to create. It is one of the Great Success stories of a minority owned channel. The Nbc Universal transaction, we committed to launch minority owned networks. We have launched four of those already. This is a space where minority ownership of businesses, Wealth Creation opportunities, and conversation shaping opportunities is very important to us as a company. Thank you. Africanamericans View Television programming at a more significant level than the general population. This seems to be a disproportionately smaller amount of programming towards urban and africanamerican audiences. On its basic cable programming tier, does comcast carry any africanamerican controlled and operated networks . If so, are those networks carried on the basic tier in every market were only in select franchise areas . I am not sure what are basic tier is anymore. I can tell you that our most popular tier is our basic digital tier. We carry 11 africanamerican owned or targeted networks, which is the sum of africanamerican owned or operated networks that we know about. I know only three of them are africanamerican owned. We do not necessarily know whether these other networks are majority africanamerican owned, minority, but they are identified as africanamerican targeted networks and we carry all 11 of them. Thank you. How do you respond to claims that comcast and Nbc Universal has blocked certain content providers like univision sports from being carried on your services or unfairly laced channels of other content providers, like Bloomberg News, because they compete with Nbc Universal channels . Those are two very different questions. I would deny those charges. I think they are not true. In terms of the way we treated Bloomberg News, the irony of the Bloomberg News situation was that louisburg news was positioned in the place it was on the channel lineup he for we owned cnbc. There could not have been any discriminatory intent. I do not want to rely on that argument anymore. We had a dispute with Bloomberg News and it was resolved. We have resolved that matter entirely. Would you care to respond to the claim about univision sports . I was worried about the time. I will quickly say, we carry eight univision networks. Univision has come to us and asked for additional coverage of three additional networks. We are one of the largest, if not the largest, carrier of hispanic programming. 58 channels. We will resolve our issues with univision in due course. Thank you very much, mr. Johnson. I do want to point out, i do not want to sound hostile to this merger because i think the government needs to stay as much out of the Business World is possible, but ive had some concerns raised by some constituents and some Interest Groups that i have agreed to talk to you guys about and i think that is the purpose of this hearing, to get the stuff on this table. A combined comcastTime Warner Cable will serve 90 one percent of the hispanic households in the u. S. And will be the top distributor in 19 out of the 20 top hispanic markets. We know you guys owned telemundo. Along with what mr. Johnson was asking, what assurances can you give us that you wont discriminate . Do you have internal procedures in place to prevent that kind of discrimination . I should have waited for your followup. We have not been able to verify those numbers, just for the record. I have observed that sometimes big is bad and i understand that. But sometimes they get is good. And sometimes big is very good. Covering a greater percentage of the hispanic population in the United States is a really good thing. We will bring that commitment to those communities in the same way we brought it to the current comcast footprint. We have a significant commitment to carrying hispanic programming. We carry 58 hispanic channels currently. We have a longterm retransmission consent agreement with univision and we carry eight univision networks. This follows up on my overall concern about the difficulty for new programmers to break in to the market. You hear him testify about the fact that his ratings in markets where he was removed from his cable system. I guess the level of vertical integration and the fact that nbc owns [inaudible] let me respond to that. This is one of the most litigated issues that exist in antitrust law. A percentage of the market that a Single Company can have before there is a risk that it can foreclose content to its consumers. Twice the fcc had extended proceedings to determine what was that percentage of the market. Twice they concluded that the Cable Company had more than 30 of the market, it would be an undue risk of that Company Serving as a bottleneck or extorting improper pricing from channels. Twice, the d. C. Circuit struck it down. Finding that 30 share, a Cable Company would be able to control the market. We are coming in below 30 . In the cable channel has more than 70 of the rest of the country to be able to go after. I am running out of time. The perception that exists there are legal rules that prevent us from discriminating against a new channel or an existing channel in favor of content that we own. That is something that already exists under the law. One of the mitigating factors has new technologies, you are getting more competing cable companies. We have two cable companies. Comcast owns the rights to the astros baseball game. Not incentive for you to sell the rights to carry the astros games when you can use it to bring in 100 internet, cable, phone into your house. How will we address the issue of fair access . I smile only because i wish we had that problem with the houston Regional Sports. It is a perfect example. Before the fear about our control of this is overstated. That network is controlled by the two teams. But both the astros and the rockets. We have a minority ownership interest in it, but they control the pricing of the network. They control the distribution of it. Even if that were not true and we were controlling that, that is on the Program Access side. You have the Program Access rules and i know that under the Nbc Universal order, a small Cable Company has a right of arbitration just on that Regional Sports without any other programs, without any other cable channels bundled with it. We will move along. We will now go to the distinguished gentleman from michigan. I think all the witnesses for their important contributions. I have a strong feeling that we may have to have another hearing on this because of the complexity of the material. I would like to start off with just observing that mr. Hemphill left out the consumer welfare as the key objective of antitrust law. The goal of antitrust is to ensure dynamic competition in open markets. But i did not hear a lot about keeping prices low and choices for the consumer. I would like to turn to mr. Grunes who said that 30 is not enough to be anticompetitive. No court has ruled that 30 is not enough to be anticompetitive and the Supreme Court has also ruled that 30 of america was a troubling trend toward concentration. And also, what about the 40 control of the Broadband Internet . How do you see this as something that we may not overcome if this merger were to go through . Thank you, Ranking Member conyers. I did not advocate 30 as not being a problem. The merging parties i point out a couple of things. First of all, judge diane wood of the seventh circuit, who was also in antitrust division lawyer, found that 20 was large enough in the toys r us case, depending on the market. The issue here is not simply numbers. A subscriber is not a subscriber is not a subscriber. When you have the top 10 or top 20 markets, that gives you power in each of those markets and that is the power we should be concerned about. In terms of the broadband shares, i am not sure whether it is 40 , 50 , it could be as high as 60 , but the one thing i can say is that we have not heard comcast or Time Warner Cable, and today and say we will get those shares down to 30 . They are talking about the video shares. Have not said a word about the broadband shares. Thank you so much. I am under a very tight frame. Maybe on the second round. Let me turn to mr. Polka. Higher prices and fewer choices, which is what we are concerned about. I think the department of justice is going to take some little while sorting this out and i do not know if it is resolvable, to be honest with you. At first blush. What are your cautionary comments to the committee about this . Very cautionary. These are really three separate mergers that we are talking about, not just one horizontal merger. You have the combination of programming assets. You have the combination of comcast distributional and other programming assets that can be combined. Mr. Chairman, i would note that Grande Communications is a member of ours and is very concerned about the nature of this big deal. And then the ability of the larger company, even though it may not be 30 of the market, to be able to have influence over other programmers, other Large Media Companies that they deal with in terms of what prices are charged to the comcasttime warner company. As the comcast market increases, so can the prices that they demand. Is that a point you made in your discussion . Yes, sir. We have seen comcast point to the fact that they have declined internet pricing by 92 over a 15 year period. Internet pricing at the core of the internet transit has gone down 99 . We have seen a decline of eight times as much as comcast has passed on to its customers. Secondly, a lot of the conversation here has been around video programming. I did not understand his response. Wait a minute. [inaudible] let him finish. I will try to answer that when we get there. The ultimate way in which video content and be distributed to consumers is over the internet. Today, American Consumers use about 300 minutes a day per capita of video. Only 15 minutes of that is delivered over the internet. Over time, the cost of publishing that content continues to decline and if allowed to operate freely, somewhere between 220 and 250 minutes a day will be delivered over the internet. Comcast, through its interconnection strategy, is deciding to limit the ability of overthetop video because it directly competes with its linearly Program Video and gives it an additional control point over the production of the video. Thank you very much. We will now go to the gentleman from north carolina. Thank you, mr. Chairman. I am sure my constituents back at home who are time warner customers want to cut right to the chase. Are my constituents going to face higher prices for Services Post merger . Mr. Holding, there is nothing about this transaction that will lead to increased prices for consumers. There are consumer benefits that your constituents will see as a result of this transaction. Faster internet speeds, more videoondemand choices, more free videoondemand choices, the ability to watch more content on a streaming basis. Inside and outside the home, access to our video platform, which is truly a groundbreaking new way of watching television. There is nothing in this transaction that will result in an increase in prices for any Time Warner Cable consumer. You said in the past that we are certainly not promising customer bills are going to go down or even increase less rapidly. Do you still stand by those comments . What i said was, and i have a nasty little habit of telling the truth. I was asked the question and i said i cannot guarantee the prices are going to go down and i cannot guarantee that they believe an increase at a lower rate. I think this transaction has the potential to slow the increase in prices because with our additional scale, our additional investment, and our ability to gain some purchasing advantages in the set top box market, may be able to move the needle slightly on the programming side. What other benefits we can get as a result of the combined skill of the company, consumers will see in terms of impact on their bills. For us, consumers are front and center. I think consumers will be the big winners in this transaction. Any moderation that we can bring to increases in their bills will certainly be one of the benefits that we would love to be able to see. Mr. Shaeffer has made some fairly direct allegations. Even though the technical aspects of what he is talking about our little bit above me, i do get his point very clearly that the combined share of broadband and also the amount of share you have in top markets and so forth is powerful. If you could respond to the allegations. Thank you for that opportunity. I will try to bring this down to a level which i can understand. I think there are two different markets that we need to consider. One is the broadband isp market, the last mile market. Our delivery of Broadband Services to our customers. The second is the interconnection market, which is the first mile market. How internet providers, how google and netflix, get their content onto the internet and into our isp so that our customers can gain access. I dont believe that the market share we are achieving in the broadband isp market, the last the market, is close to level that has any impact whatsoever on the first mile market. That mile market is an intensely competitive market. It is where dozens of operators, content delivery networks, as mr. Oviders shaeffer has described it as a market in which he is competed vigorously for 15 years, trying to offer the lowest price and the highest quality. It is a market where pricing has dropped 99 over the last 15 that and as a result of the netflixs of the world and , the youngthe world man working in his garage in his has dozens and dozens of choices on how to get his content onto the internet to enable them to deliver it to our customers. We think that market is functioning extremely well. We dont think that market and the structure of the market is affected as a result of this transaction. The questions that have come up recently about that market are better look that on an an industrywide basis, which is what tom wheeler and the fcc have said they are prepared to do. If you gave me the invitation, one thing i also want to reply is the description of our netflix transaction. Which, as far as i know, is inaccurate. We did not force netflix to enter into interconnection deal with us. That was netflixs idea. They came to us it was their desire. They wanted to cut out the middleman, their words to read the middleman happened to be cogent, by the way. To deal directly with us. Although our agreement is subject to a nondisclosure agreement, and i cannot disclose the terms of the agreement, which i would do it willingly with the permission of netflix. It has been public reported, contrary to what mr. Shaver said. They are not paying more to us under this agreement, but less. Netflix made a commercial decision that given the size of the traffic, they could deal with us directly. They turned around two weeks ago and announced they had done exactly the same type of deal with verizon. Thank you, mr. Chairman. We will now go to the gentlelady. She has a child at the university of texas. [laughter] thank you, mr. Share chair. We appreciate you taking the time this merger has the attention of many folks across the country. My constituents are no different. They rely on cable access for tv. For broadband. It is important to my constituents that i hear and i hear about it from them. They are concerned of paying a higher price for the same service they have had to read they are very concerned about the impact this might have. Following up on the questions, you have said you dont expect this transaction to have an impact on prices. If this wont have an impact, and economies of scales are not achieved, then what can be done to help lower prices . Is a very good question. Im not sure i have an answer. When you look at the number one driver of icing, this may pricing. When you and you might want to asking the question. The number one driver of cable pricing is the cost of programming. The cost of programming is rooted, ultimately, in the cost of producing the programming. In particular, sports rights. If you look over the last decade, there has been a 120 increase industrywide in the cost of cable programming. And yet the average the increase in the most common package of cable programming has risen at less than half that rate over that period of time. Cable operators large and small have been million only fighting valiantly fighting to mitigate the costs of programming. Im not sure what the answer is in terms of controlling the spiraling increases in programming and programming rights. It particular sports rights. Somewhere in that upcoming is the alchemy is the ultimate solution. One other point when you look at what happens in the pricing of programming, the fcc statistics deal with a particular package. If you look at the cost of cable programming on a per channel basis, the increase has only been about 0. 2 over the last decade to read last decade. That is about 1 12 the rate of inflation. If you look at promotional bundles, the majority of our customers consume content the pricing has been flat over the last seven years. I want to ask mr. Polka the same question. Thank you very much. A bit, you are correct. David, you are correct. There are enormous sports costs. Which are paid by large buddies that own tomcat content like Comcast Universal. They pay those rights. They pass those on to their customers, who were Cable Operators. Among which are the 850 members of the aca. Whose media sizes 1500 median size is 1500. In the context of this merger, there is the ability to be anticompetitive in the use of that programming. I will give you an example. Our members purchased their programming 30 National Cable holders and cooperative through the National Cabletelevision quadra if cooperative. It is likely they will seek to recover their sports rights. It is sort of one pocket to the other. If Nbc Universal charges comcast a higher price, and that price is transferred down to the smaller providers, our members who by programming, our prices is Member Companies and competitors to both comcast and time warner will rise. Which will ultimately lead to rising prices for consumers. We are not convinced that this merger will lead to lower prices for consumers. In fact, to your point about choice, there is no choice today. Because of programming from Companies Like comcast. How it is sold in bundles. Bundles of programming must be purchased were no programming can be purchased at all. Ultimately, unless the bundles are broken up, all they will see is higher prices. Thank you. Thank you mr. Icd next one up i see the next one up as the gentleman from virginia. Let me direct my first question to you, mr. Cohen. To the extent that comcast is able to obtain discounts, is it likely they will seek discounts to compensate for lost revenue . I yield my time to the professor who will comment more knowledgeably. I think the answer is no. It in lay terms, if we got a bigger discount, that would cause a programmer to go to a smaller Cable Company to try to make up the discount by getting a higher rate from the programmer. That would assume any initial negotiation, it left money on the table. Charge them less than what they could otherwise get. Now that they got less from us, they have to go back and get more from the other programmer. I think economics and antitrust law is pretty well settled on that fact. Before we go to the professor, i have other questions. Next im going to go to mr. Sh schaeffer. You argue you comcast you sent content for regional customers. Do the requirements in the mec order, nbc order adequately address your concerns . While comcast has allegedly it is abiding by the Net Neutrality rules and not discriminate against content, it has refused to upgrade its connectivity to all major backbones globally. In the written testimony, the alleged that the vast majority of traffic goes through connections. It says that over 30 of the traffic is going to its customers. There is clearly an internal inconsistency. What comcast has done is by refusing to upgrade the connections, two things. They have denied the customers who they are denying highestquality service. They know the requests will not be answered. The bits cannot flow back to their network. Secondly, they have created an inferior let me interrupt you. I dont want to give you the opportunity to repeat your testimony. Does the nbc order adequately or dresser concerns . No. No. Does this transaction make the comcast standard the industrystandard . Does that have an impact on Cable Provider members . I think that is a legitimate question. That necessarily needs to be part of the review by the fcc and department of justice. I have mentioned the number of video concerns today. Many other aspects of this merger need to be reviewed, whether the cable advertising market, the broadband competitive market. Access to technology, development of technology. How that is met about two other competitors. Is a line of inquiry that they need to pursue. Let me hop back to mr. Schaeffer. You have stated that you asked comcast add additional ports to decrease congestion. What our ports and are they expensive . I want to give mr. Hemphill a chance to reply. The port is the physical location where the traffic flows between the networks. The capital cost is trivial. We have offered to pay not only are copper bowl capital costs, but also comcasts. They have refused. Professor hemphill, we defer to you. To supplement the answer. If theres anything else that you wanted to respond to, have at it. On the first point, mr. Cohen said it well. From an Economic Perspective we would not expect some sort of shortfall in one market to be made up in another. A savvy company is going to negotiate as bested can. Theres not some quarter it is trying to reach. With respect to the conversation we have been having about ports. Whether any of this raises a foreclosure concern, it is important to understand that payment for interconnection is not new. It is not a new fight. It has always been the case that a payment is either going to be made through cash or reciprocal carriage. To think about this as a foreclosure concern is wrong. What is really going on is a fight about who should pay for what in this competitive, highly competitive business. Thank you, my time has expired. Thank you, mr. Chairman. I will go to the gentleman from new york. Thank you and i want to thank the witnesses for europe presents. For your presence. I want to raise the question of the implications of this merger on women and minority owned businesses. Let me it knowledge that amongst the constituents i represent, a substantial number of cable subscribers, as you know, our time warner customers. Time warner has been a spot spoke corporate citizen. In brooklyn and queens. I have a relays and i have every reason to believe that will occur. There are some issues that they are concerned about that i want to explore. Let me begin with mr. Cohen. You testified the merger will result in substantial benefits to consumers, correct . Correct. You indicated that comcast you indicated that Greater Customer choice is a likely benefit of the merger. Better Customer Choice in terms of ondemand tv everywhere. That is correct. You also indicated that innovation will result from the merger. That could translate into enhanced video, voice, and or internet opportunities for the consumer. Scale leads to investment. Investment in r d and infrastructure. Better, more secure networks. More reliable networks. Innovation of the future. Just like our larger global and National Competitors are investing. Developing products for three years from now and five years from now we cannot imagine now. I think that is a sound premise. However, as many of my colleagues have observed, there has been no commitment even today by either you as a relates to the impact of the proposed merger on consumers. That is the the people i represent are most concerned about that fact. Let me see if we can get a little clarity on that. Comcast is a publicly traded company. As a result of being a publicly traded company, you have a fiduciary obligation to your shareholders . That is correct. Part of that is you have concluded that this merger will likely result in greater profitability for comcast if it were to be approved . I think the answer is basically yes, but i really want to say this. A couple of years ago, we woke up and realized we are now competing in a different class. A couple of members have referenced this. The world is changing with explosives change explosive speed. The business rationale under the merger relates to our ability to innovate, invest, and stay competitive. I understand that. I dont want to cut you off, but my time is limited. You would knowledge it is more profitable than if we were not able to innovate, invest, and continue to grow. That is a very sound point. And consistent with your fiduciary obligations. The questions my constituents to ask is it for reasonable is it reasonable for them that pursuant to a merger likely to result in weaker profitability, there will be some positive that if its for them in terms of impact positive impact for them in terms of price . I dont know if it out of this transaction will come customers more satisfied with service. There is more to making customers happy than just the price. It is the value we are delivering. We believe consistent with our duty to shareholders, we have to focus on price, focus on customer satisfaction, customer focus on customer service. As a way to grow our customer base. All those interests are aligned. Thank you. Let me say this to the panel. After mr. Smith of missouri does his question, we will take a 10 minute break. You all have been in the chair quite some time. Mr. Smith of missouri is recognized for five minutes. Thank you. My first question is for mr. Cohen. You testified that comcast and twc serve different geographic areas and do not offer services to the same consumers. Yesterday yes or no, will consumers experience any decrease in comp is for video, broadband, or Voice Services . Unequivocally, no. Thank you. Mr. Pocock polka, many of your Member Companies are in rural areas. Like the area of missouri i represent. Bill daley though they do not compete directly with comcast or time warner, does this affect Cable Operators who do not directly compete . Yes they do. Are voiced our voice chat our vice chairman is one of your constituents. It does not compete directly. As i mentioned before, with the combination of comcast distribution assets with Time Warner Cable assets, because of their size and ability to demand lower prices from other programming content writers, it does have an impact on the prices charged i all other by all other molded programming distributors. We may not see this until there is more that comes out. The prices are wholesale programming prices. The ability of comcast and time warner will create a bigger disparity in pricing between comcast, time warner, and all other multivideo programming distributors who by programming to the national cooperative. Comcast will pay a lower rate. The disparity in ice is between comcast and our members will increase. The 10 or so Small Companies would see an increase, while comcast will see a decrease. That is what we expect to occur. Mr. Shafer schaeffer, i would like to ask you a question about interconnection. What effect would be merger and the merger have in marketplace negotiations . It would have a significant impact. Comcast would control access to a greater number of consumers. For those consumers, when they enter into a contract to buy a broadband, they dont mortgage their eyeballs. The comcast feels they do. Mr. Patrick, i was interested with your testimony. What was the reason they cite dropped you . Mr. Cohens explanation that it was a bandwidth issue. The thing that concerns me is it is now the policy are they going to be dropping independent channels when they need broadband band with without regard to support from the audience . Without regard to anything that independent channel has going . Mr. Cohen, is there any other reason they were dropped other than man with . Bandwith . It was primarily a bandwidth determination. Consumer demand for that channel in that market was put it at the top of the list to be dropped. Nothing to do with the fact that it was independent or are eight percent owner minute ownership interest. My concern is this. Is a rural tv station. A lot of folks in my area watch it quite often. If other people across this area country want to watch it, i hope the have the opportunity. Can you give me any documentation showing that the 400,000 households were there other independent cable Television Networks that had lower viewership that you did not drop . We can certainly followup on that. Put in a queue fra in a qfr. We still carry the network to 600,000 or 700,000 users. This is not a situation where we said this is a terrible channel. It is a local market decision based, again, i hear and i understand the content being rural content. We are primarily a urban cluster Cable Company. Even western states, most of our consumers arent urban areas. Are in urban areas. We are not depriving anyone of access to rfdtv. Just only to your consumers, the 400000 in colorado. At this time, we are going to reconvene at eight minutes after. Thank you for your patience. Allow you to take this is a portion of the hearing. If you want, you can watch the entire thing online at cspan. Org. Tomorrow morning on the cspan networks at eight 30 eastern time, the u. S. Chamber of commerce will host a discussion about the state of u. S. Infrastructure and its ties to the economy. That is on our companion network, cspan2, followed on cspan by a discussion of states expansion of medicaid with the alliance for Health Reform live at 12 15 eastern time. Next, a look at the 2014 midterm elections and some of the issues currently before congress. Washington journal continues. Host we are joined by Sabrina Siddiqui and matt lewis of the daily caller. The houses on district work break last week. Last week was a busy one on capitol hill, highlighted by that committee on benghazi on benghazi. What you want them to answer . We need to learn about what actually happened in benghazi. Why was the consulate not more secure . Why was there no be enforcement or calvary to arrive or cavalry to arrive . Was there a coverup . Was there an intentional effort by the Obama Administration to downplay the terrorism aspect heading into the 2012 reelection and to talk about this video creating a spontaneous uprising . They have a lot of work cut out for them and i think they will have their hands full. Host there have been congressional hearings on the subject. Have some of those questions been answered by these groups . Been countlessve hearings and a number of investigations on both the house and senate in the relevant committees. I think certainly the administration can handle this a lot better than they did. The problem is there hasnt been any smoking gun that has emerged from the investigation they have already conducted. I know a republican has actually said before this panel was announced that this chapter is kind of close, there wouldnt be a research on this. There was nothing more they could have done in that circumstance, there was no standdown order given by hillary clinton. There was no evidence of a coverup. A couple of republicans said to move on for couple of times. I do think that there are some politics to the timing of this investigation. It has been almost two years and john boehner had a lot of pressure to do it up until now. It doesnt strike me as a coincidence. Heres a headline from the National Journalists week. You wrote about this piece in the national journal. What do you mean by that . Part of the reason for having an investigation is not to convict people but to discover facts. We saw just in the past week or actually request which produced emails. I think showing the administration was attempting to misrepresent what happened in benghazi for political purposes this piece essentially argues a pox on both their houses. Republicans are overplaying it for political purposes and their fund raising benghazi. Are all all bad, they crooks. My point is assuming everything in the article is true, assuming the white house did intentionally mislead the American Public and assuming republicans are overplaying it for political purposes, i would still argue the former is much greater and we should hold the white house to higher standard. I think it is a very big deal. We invite our viewers to call in. Democrats can call in with questions and comments for Sabrina Siddiqui. If you are outside the u. S. , it is we will also be checking our twitter feeds and you can also email us. Sabrina siddiqui, tell us about the congressman who has been picked ahead for this select committee. What does he bring to this investigation . Guest he has a background as a former prosecutor. Risings to be a younger star. This is going to elevate him to a much higher profile and introduce him to a more national audience. He is from south carolina. He has fought certain highprofile cases in the past. As mostuck me interesting about him is he is come out and promised that he is going to be very independent in this investigation. Him this is not about politics but rather about answering some of the questions that matt said republicans have not adequately answered. We were talking about fund raising. I think that is maybe an initial moment where he may be had not said what he hoped the party would say. It puts him on the defensive position where they are being asked why their lead investigator as saying dont fund raise off of benghazi. Host emails going out . Guest the committee was tasked with collecting the publicans to the house. They have sent several fundraising emails. We asked how you justify fundraising off of this, especially when trey gowdy is saying not to do it. Us this is about holding the democrats and administration accountable. They believe their voters should be aware of the democrats that voted against establishing the select committee and those democrats dont want americans to learn the truth about what happened in september 11, 2012. Then there are a couple of outside groups that are fundraising. There is an actual coordination with members of congress. John boehner and eric cantor was asked whether there should be fund raising. They didnt say there shouldnt be. I think they are of the opinion it is fair game. Host atle bit little bit from that press conference. We will come back and get that lewiss thoughts on them. [video clip] our focus is on getting the answers to those families who lost loved ones. Their fundraising off of it. Is getting the truth for these four families and for the American People. Whys that happening . Our focus is on getting the truth and the American People and these four families. Youf that is the case, will to make it even more clear that it is not going to be a circus or political . Democrats will get shut out and it will be political. I had a conversation with the minority leader yesterday. We made it clear this is a Serious Investigation and we wanted to Work Together to get to the truth. The 75 split is eminently flip imminently fair. From their perspective it is not so much about the ratio but the power the democrats have. Abouthad a conversation how the committee will operate. There are further conversations continuing on that issue. Heatedatt lewis getting questions about fund raising and how the committee will operate. Guest i think it is an effort by democrats to muddy the waters and nullify whatever republicans find. Now politicizing this very serious thing. It has also been almost two years. , think it is very bad optics very bad politics for republicans for there to be an appearance that they are politicizing. Some point these things are no longer tragedies that you are exploiting, like a shooting that just happened and your kind passed legislation five minutes later. The parties actually take a principled stand. Look at the iraq war. President obama won the democratic nomination arguably because he opposed that war. You could say he was politicizing it he had a principled stance. He opposed iraq and thought it was a quagmire and does not want that to happen again. Of course he is going to fund raise off that. Is a principled stand. We are getting that now with benghazi. It is not what you jumping on an issue that happened recently. This is part of our political landscape. It is part of where the parties are coming down. If republicans say we think this is important that the public knows what happened, that is a campaign. You need resources to run a campaign. I dont think there is a problem with this. An appearance of a conflict of interest. For a Republican Committee to do it, it is probably bad politics. The heres a headline from newspaper. What are democratic members of congress saying to you as they consider whether to participate or not . Guest there are strong feelings on both sides. One idea that there should be some representation on this committee. Then we wont have any control over the subpoenas or how witnesses are questioned or what information is then released to the public. There is a larger coalition of democrats who say we should boycott this altogether. They are taking a principled stand that there are questions , it ised to be answered been two years and this is been investigated time and time again by republicans. They keep bringing it back up for political purposes. We should not play a part of that game. That contention is going to went out. Nancy pelosi is not believe that this is anything more than politics. They are most likely inclined to boycott. They will be all in or all out. There wont be in in between. They are leaning toward staying out of it. There is a concern that there might be a lot of miss repton misrepresentation of what comes out. One thing we learned about benghazi, if you work for the government and get into a situation you cant depend on lex tomorrow, rollcall Senior Editor David Hawkings will look at the history of congressional select the midis will stop in the wall street Journal Health policy reporter examines the following uninsured rate in the u. S. And the demographics of the population. And then a discussion about pay and benefits for active knowledge area personnel. As always, we will take your call then you can join the conversation on facebook and twitter. Thats washington journal live tomorrow here on cspan. Each issue should be handled differently. I have a friend philosophy that search for the a sick emesis that i approach everything Economic Freedom is my guiding principle. From that comes for facts one, does the commission have authority to act on a particular issue . What authority has Congress Given us in the statute . Second, is there harm to consumers and a solution we can remedy whatever harm has been bob has been brought forward . Then we not regulate by analogy. Of do the benefits of regulation outweigh the cost . That is how im approaching each issue individually. You tend to take each issue as they come forward is my overall philosophy. The new fcc commissioner monday on the commuter the communicators on cspan2. Lastly, house Judiciary Committee unanimously approved legislation that would change the way u. S. Government gathers intelligence under the foreign Intelligence Surveillance act. The legislation would still need to pass the full house. Here is the Committee Markup eating prior to its vote on the bill. This is about two and half hours. Rex i now call up hr 33 62 one for purposes of markup and move the Committee Report the bill favorably to the house. He clerk will report the bill to reform the authorities of the federal government to require the production of certain Business Records without objection, the bill is considered as red. Today, house Judiciary Committee will consider a bipartisan proposal that is the, nation of months of oversight and collaboration between members from both sides of the aisle to reform Certain National security programs operated under the foreign Intelligence Surveillance act or fisa. Over which this committee has primary jurisdiction. I want to thank the sponsor of the usa freedom act, chairman sensenbrenner for his dedication to this issue. I also want to thank him and Ranking Member conyers, mr. Nadler, mr. Scott for working with me to prepare the bipartisan substitute we will consider in a few moments. Recordst is a business revision often referred to as section two hundred 15 of the patriot act allows the government to access Business Records and foreign intelligence, international terrorism, and clandestine intelligence operations. Unauthorized disclosure by Edward Snowden revealed to the American People the National Security agency as part of its mission to protect United States from terrorist collecting been metadata under section 215. Since the unauthorized public release of this program, many members of congress and their constituents have expressed concern about how the program is operated and whether it poses a threat to american possible liberties and privacy. The leaks by Edward Snowden also reveal a classified program operated pursuant to the pfizer amendments act of 2008, which was enacted to maintain the nsa possibility to gather intelligence on foreign targets overseas. The house Judiciary Committee has conducted oversight of these programs and held a public hearing where we heard from officials from the justice department, the director of national intelligence, the nsa, the fbi, and Civil Liberties groups. Committeeer 2013, the held a classified hearing where members were afforded the opportunity to probe these programs with officials from doj, nsa, and the f the eye. The Committee Held a comprehensive hearing to examine the various recommendations to reform these programs offer i the president s reviewed through on intelligence and Communication Technologies and the Civil Liberties oversight board. The president announced his desire to and the bulk collection of telephone metadata. In march, president obama outlined his proposal to allow access to noncontent elephant records held by telephone companies. Situation,mergency government would retain the access from with the pfizer court. Access would only be within two hops of the selection term being used and the governments handling of any records it acquires would be governed by minimization procedures approved by the court. Also correctly acknowledged that reforms to these programs must be implemented to legislation passed by congress. The house Judiciary Committee is taking the first important step toward his goal today. The terrorist threat is real and ongoing. Cognizant of the threats we face. At the same time, Congress Must ensure the laws we have enacted are executed in a manner that protects National Security while also protecting your Civil Liberties so we can recreate so we can regain the trust of the American People. Im confident today the minute he the committee will do just that. Im happy to acknowledge mr. Connors for his opening statement. Thank you, chairman goodlatte. Members of the committee, it is not an accident that the house Judiciary Committee is the committee of primary to thection with respect legal architecture of the government surveillance. We are, for the most part, lawyers will stop i must thediately single out people who have played such important roles in this. , former goodlatte chairman sensenbrenner, the gentleman from new york, mr. Nadler, and the gentleman from virginia, bobby scott. We ask these difficult questions because we are the proper forum for complex discussion about privacy and Civil Liberties all stop moreover, to the maximum extent possible, this committee has always worked to hold that debate in outlook, where we and the officials we call before us can be held accountable to each other and to our constituents. Possible tot is have an open, honest conversation about the tools our government uses to keep us safe. Conversationis includes a serious look at whether these tools accord with our national values. That outlook debate on core questions of five us he and Free Association not only build confidence in our government, but when credibility and resilience to the National Security infrastructure that is built to last and for a number the usa freedom act, is the proper outcome of just that source of opera and open debate. Act represents the consensus view that all consensus bulk collection must end. In the aftermath of the attacks , 2001, without1 notice to the courts or congress, our government sees for itself the authority to conduct rod surveillance on its own citizens, without warrant or individualized vision will stop the years since, these programs an amount of legality. Dragon surveillance of United States citizens it is not legal nor is it necessary. In my view, it never has been. With the passage of the usa freedom act, this will be made explicit. 149 cosponsors evenly divided between democrats and republicans. More than 40 organizations representing Civil Liberties groups and Technology Groups spectrum olitical political spectrum continue to call for the passage of hr 3361. Telecommunications sectors back this bill, largely because it enables countries to be more transparent companies to be more transparent to their consumers, but also because comprehensive surveillance reform is good for their bottom line. Takes all ofom act these interests into account. It is a less than perfect compromise and that is unusual. Vital,s important, substantive changes that will work to restore confidence in the intelligence community. My conclusion is these reasonable reforms are both appropriate and consistent with our commitment to the right of i urgeple to be secure support hr 3361 and i yield back the balance of my time. Thank you. The chair thanks the gentleman and i now recognize mr. Sensenbrenner to authorize a substitute amendment. Lex i have an amendment in nature of the substitute at the desk. An amendment to an amendment offered by mr. Sensenbrenner to strike all i ask unanimous consent that the bill be considered as read and open for amendment at any point. Without objection, the amendment is considered red and mr. Sensenbrenner is recognized to explain it. Think you very much, mr. Chairman. I want to thank the members of the committee to come together to reach this agreement, particularly chairman goodlatte for the study, responsible leadership, Ranking Member conyers and congressman nadler and scott for their considerable expertise. It is no secret that congress has got more divisive, so its gratifying and even this deltek to me to see this committee them together to address what of the more challenging and important issues facing our country. Ira member this committee similarly cooperating after some tepper 11. I was chairman of the committee at the time of these horrific attacks. We were asked short order to fundamentally restructure how the government operated to protect our National Security. This has exceeded anything i experienced in my career. Then speaker Dennis Hastert was under considerable pressure to bring a bill to the floor quickly. Debate,todays leadership threat to bypass the jurisdiction. I pleaded for patience and ask them to have faith in the Judiciary Committee. Theis credit, he agreed and committee banded together and pass the usa patriot act with unanimous bipartisan support. I would add it was representatives like Maxine Waters to the left and bob are on the right, all of them voting aye on the product. I believe it made the country safer while